The RBI has contended that the inclusion of all foreign inward remittances in the proposed new reporting system will substantially expand the scope of transactions monitored and may place a heavy reporting burden on the banks.

The Union Cabinet had cleared the Foreign Contribution Regulation Bill last year. The Bill proposes to mandate banks to report all foreign inward personal remittances to the Financial Intelligence Unit-India.

Inclusion of personal remittances in the category of foreign contribution transactions for reporting may discourage non-resident Indians and the expatriate work force to send money home through banking channels.

Further, it may make them send money through other channels like hawala and hundi, the RBI has added.

In view of the present scenario of liberalised current account convertibility, this kind of change would mean that a large number of transactions, which have no relevance, will be reported, the RBI said.

Suspicious transaction reports, which cover foreign remittances also, is a more focussed tool in the matter, the RBI feels. Banks give such reports to the Financial Intelligence Unit-India, as mandated by the provisions of the Prevention of Money Laundering Act.

The central bank has also suggested that banks may be advised to prepare suspicious transaction reports involving foreign inward personal remittances based on frequency, country of origin, source and beneficiary of remittance, instead of the proposed stipulation of summary reporting of transactions representing all inward remittances.

The RBI added that it was neither aware of such practices being followed anywhere in the world or of any international convention that mandates reporting of all inward remittances.